Report highlights North Sea challenges for gas industry

Britain’s oil and gas companies spent a record 8.9 billion pounds in 2013 to produce 8 percent less fossil fuel than the year before, a survey has shown.

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The activity survey published by Oil and Gas UK is seen by analysts as reinforcing the need for government action to support the industry along the lines of what is happening in Holland, a call made earlier this week by former oil industry boss Sir Ian Wood.

The report, which Oil and Gas UK executives will discusss with the region’s energy companies at a meeting in Norwich on Friday, points to better than expected production last year and forecasts that trend will continue with 25 new fields expected to come on-stream over the next two years,

However, concerning further exploration, it says the industry is facing its biggest challenge in 50 years.

Only 15 exploration wells were drilled in 2013, according to figures from the Department of Energy & Climate Change (DECC), continuing a steep downward trend since 2008 when 44 exploration wells were drilled.

Exploration over the past three years has been at its lowest in the history of the UK Continental Shelf.

Oil & Gas UK chief executive Malcolm Webb said: “Even if currently planned wells proceed, the rate of drilling is still too low to recover even a fraction of the estimated 6-9 billion barrels yet to be found.

“Britain’s waters contain an abundance of oil and gas yet to be found and it is critical we find the means to turn the current state of exploration around. Rig availability and access to capital are the two main barriers noted by our members.”

Sir Ian’s report had observed that the UK was trailing behind Holland when it came to extracting gas despite having more reserves and highlighted the Dutch government’s investment in infrastructure, it close regulation and open approach taken to sharing information.

East of England Energy Group (Eeegr) chief executive Simon Gray said the two reports coupled together “made interesting reading” and made the Wood Review recommendations seem very sensible if they were adopted.

He said: “Is the attendance of energy minister Michael Fallon at Eeegr’s Southern North Sea conference at the Norfolk Showground next month just coincidence or is there at last real recognition by government of the crucial role that the East of England plays to the UK PLC economy.

“The prospect of some fiscal adjustment to encourage greater investment and longer exploitation of existing assets rather than a premature dash to decommission is to be applauded. If they are all adopted this is very encouraging for the Southern North Sea.”